Shlemenko suspended 3 years and fined $10K by CSAC

June 24, 2015

Alexander Shlemenko was suspended three years and fined $10,000 by the California State Athletic Commission as it is the harshest penalty against an MMA fighter since it began regulating the sport.  In addition, Shlemenko’s win against Melvin Manhoef at Bellator 133 has been overturned.

The commission voted unanimously by a 7-0 vote in favor of the penalty.  Although Shlemenko’s attorney, Howard Jacobs, argued that there was a lack of a “B” sample and a possible violation for not splitting the urine sample.  The commission did not agree with Jacobs’ arguments.

But the commission did not agree.  The fact that Manhoef was knocked out by Shlemenko may have played a role in his penalty.  Of course, Shlemenko’s tests were another reason.  Per MMA Junkie, the tests revealed the steroid oxandrolone and oxandrolone metabolites as well as a testosterone-to-epitestosterone (T/E) ratio of 50-1 in Shlemenko’s post-fight urine test (the commission’s limit is 4-1).

It is not known if Shlemenko will appeal but if he does not, at 31 years old, it’s unlikely we’ll see him fight again.

UPDATED:  According to Combat Sport Law’s Erik Magraken, Shlemenko will seek judicial review of the commission ruling.  I would expect that this will happen more if commission’s seek to dole out these stiff penalties.  Realistically, what does Shlemenko have to lose?  His career is likely over if he accepts the punishment.

Payout Perspective:

One would think that if Shlemenko has a compelling case, his attorney could still appeal the commission decision by seeking a judicial review in a California Superior Court.  The heavy-handed penalty reflects a newfound position by athletic commissions in light of the UFC’s stance on PEDs.  There is an argument that the penalty is unjust but the commission can point to the glaring test results and the T/E ratio to justify its suspension.  Moreover, the TKO victory might have persuaded commissioners to allow the penalty as one commissioner put it that Shlemenko could have killed Manhoef.  We shall see if this decision will be appealed.

Nevada court consolidates Zuffa antitrust cases

June 12, 2015

On June 11th, Judge Richard Boulware of the U.S. District Court for the District of Nevada signed an order which would consolidate all of the cases in the Zuffa Antitrust Lawsuit.

Earlier this month, the U.S. District Court in Northern California determined that the venue of the lawsuit filed by Cung Le and several other former-UFC fighters should be transferred to Zuffa’s home district of Las Vegas, Nevada.  As a result, the five lawsuits filed by the former fighters were sent to federal court in Las Vegas.  However, the cases had not been consolidated by one judge which resulted in the initial set up of having multiple judges handling several cases.

Judge Boulware, who was assigned the Le case, indicated in his June 11th order that the presiding District Judges determined that the actions are related and “there is good cause to consolidate them under the same District Court Judge and Magistrate Judge.”  The order stated that neither party opposed the consolidation.

According to a Las Vegas Review-Journal article, Senator Harry Reid proposed Judge Boulware to the bench to the White House.  Of course, Senator Reid is (or was) a big supporter of the UFC.  This should not play into how Judge Boulware conducts the trial but there it is for everyone to speculate.

Payout Perspective:

I don’t believe anyone was surprised by this ruling and it makes sense.  Judge Richard Boulware will preside over the legal battle between the former UFC fighters and Zuffa.  He was appointed to the federal bench by President Obama in 2014.  He is a graduate of Harvard and Columbia Law School.  Prior to joining the bench Judge Boulware was a trial attorney for the Federal Public Defender’s Office in Las Vegas and in New York.  He also served as law clerk with Judge Denise Cote of the US District Court for the Southern District of New York after graduating from law school.

Digging deeper into the Golden Boy-PBC Haymon lawsuit

June 7, 2015

For those that want additional information on the PBC lawsuit discussed in Show Money Episode 5, we provide it here.  On May 5, long-time Golden Boy Boxing attorney Bertram Fields filed a Complaint in the U.S. District Court for the Central District of California (Los Angeles to be specific) against Al Haymon and a variety of Haymon’s associated companies as well as Waddell & Reed Financial Inc.

The complaint seeks an injunction against Haymon’s business practices as well as a sum of $100 million plus the statutory damages which would be three times the amount in its claim.  Thus, $300 million.

The lawsuit argues that Haymon, et al. violates sections 1 and 2 of the Sherman Antitrust Act, the Clayton Act, the Muhammad Ali Act and California state unfair practices law.  Golden Boy breaks down the pro boxing industry into two different parts which comprise two distinct markets: boxing managers and boxing promoters.

The alleged scheme mapped out by Golden Boy indicates that Haymon, et al. have market power in one business (i.e., management of boxers) to “monopolize another business” (i.e., promoting fights).

Golden Boy claims that the market deals “primarily with ‘Championship-Caliber Boxers’ – that is professional boxers who, during the last three years, have demonstrated through such factors as purse size, television rights, viewership, ticket revenue and other objective factors to be ‘the cream of the boxing business.’”

Specifically, the Muhammad Ali Boxing Reform Act creates a “[f]irewall between promoters and managers.”  The Ali Act prohibits “a direct or indirect financial interest in the promotion of a boxer” and from being “employed by or receiv[ing] compensation or other benefits from a promoter.”

Golden Boy argues that Haymon, et al. violate this law by managing fighters without a license in most instances.  It also claims that Haymon, et al. violate the law as it acts as promoter as well.  In this capacity, promoters are to make “extensive financial disclosures to state boxing commissions and to boxers, and imposes an obligation on promoters to notify the state boxing commission before any professional boxing match is held.”

From the Senate Report which discussed the Ali Act: “It is not plausible for a boxer to receive proper representation and counsel from a manager if the manager is also on the payroll of a promoter.  This is an obvious conflict of interest which works to the detriment of the boxer and the advantage of the promoter.”

In paragraph 22 of the Complaint, Waddell (the Haymon investment fund) offers to purchase 100% of the equity interest in Golden Boy but the transaction was predicated on a “lengthy non-competition agreement from De La Hoya (Golden Boy founder).”

This allegation suggests that Waddell, a fund with different assets, was mainly funded by Haymon, et al. in order to purchase Golden Boy.  The transaction was structured this way in order to “conceal” the identity of Haymon so as not to alert Golden Boy or anyone else of the potential monopoly.

Golden Boy attacks the Haymon “time buys” on the network by arguing that it is “patently an act of promotion by a boxing manager…”  It also claims that it has entered into “coercive contracts” with Haymon fighters as fighters must sign “multi-year” contracts with the Haymon Defendants.

The scheme claimed by Golden Boy indicates that Haymon, et al is willing to take on losses in the “hundreds of millions of dollars” initially for future gain to control the “promotion of boxing on American network television.”  Golden Boy suggests that once they have secured its market dominance, it will “reverse the financial arrangements, recoup their losses, pay less to boxers and reap massive profits, far in excess of their temporary losses, by charging supracompetitve prices to networks, sponsors and consumers.”

The argument by Golden Boy is that the time buys “lock out” other promoters from attempting to secure television deals. The issue with the scheme laid out by Golden Boy is that while it may be true that the business strategy by Haymon, et al. may one day seek to switch its current time buys to network deals in which the networks would pay Haymon, it does not means it is not against antitrust laws.

One of the issues Golden Boy points out is that boxing managers negotiate with boxing promoters on behalf of their boxers.  Golden Boy claims Haymon, et. al circumvents this practice in violation of the laws cited in its Complaint.

With the alleged scheme, Golden Boy claims that Haymon contracts create an illegal “tying relationship between relationships between services sold in separately defined markets (management and promotion of boxing).

Payout Perspective:

It will be interesting to see how this lawsuit will proceed.  One hurdle that Golden Boy may have to overcome is the allegations related to the “time buy” on networks as it is hard to argue the future business dealings for Haymon.  This is discussed in Show Money Episode 5.  There might be an allegation of anticompetitive behavior in the future if Haymon were to secure deals with all of the television networks PBC currently airs on.  But, networks such as FS1, TruTV, HBO and Showtime have non-PBC boxing on its networks.

An interesting part of the litigation will be the information that might surface considering Haymon’s alleged attempt to purchase Golden Boy from Oscar De La Hoya.

We will keep you posted.

Show Money Episode 5 discusses UFC and PBC lawsuits

June 7, 2015

Show Money Episode 5 is back with Bloody Elbow’s John Nash and Paul Gift. In this episode we discuss the status of the UFC antitrust lawsuit and the PBC lawsuit filed by Golden Boy.

If you would like to know a little more about the PBC lawsuit, you can find some more information here.

Court orders UFC antitrust lawsuit to Las Vegas

June 3, 2015

The Honorable Edward Davila has granted Zuffa’s request to transfer the venue of the class action antitrust lawsuit filed by former UFC fighters to Las Vegas, Nevada.  In an order dated June 1, 2015, the U.S. District Court for Northern California, San Jose Division granted Zuffa’s Motion to Transfer Venue to the U.S. District Court of Nevada, Las Vegas Division.

In an homage to the parties before it, the court offered in its order, “At the final bell, it is Defendants arguments that clinch this round because the relevant forum selection clause and the sec 1404(a) convenience considerations both favor a Nevada forum.”

The preceding paragraph of the order offered more fight references:

“…Plaintiffs allege that Defendant, now the heavyweight of the industry, has violated Section 2 of the Sherman Act…”

“Defendant now seeks to knock these cases out of the Northern District of California and into its home venue…”

As stated above, the court found in favor for Zuffa based on two arguments.  First, it held that the forum selection clause in the fighters’ fight contracts/bout agreements should be recognized.  With those clauses pointing to Zuffa’s home district of Nevada (or Las Vegas), the case should be decided in that forum.  This finding was directly opposite to the plaintiffs’ argument that the contracts and its forum selection clauses in the underlying contracts should not be addressed in an antitrust claim such as this.

Thus, the question was whether the plaintiffs’ antitrust claim is one “to interpret or enforce” any provision of Zuffa’s agreements so that they are transferred to the contractual venue.  The court held that the “substance of a claim is what matters, not its title.”  It therefore decided that the lawsuit was an action “to interpret” the contracts and thus the forum selection clause should be followed.

In case you were wondering, for those plaintiffs that did not sign contracts with forum selection clauses, the court stated that since they joined this lawsuit, their claims would follow the disposition of the case.  Thus, they go to Nevada too.

While most of the court order reflects on the forum selection clause, it also addressed the convenience of venue factor in deciding in favor of Zuffa.  Essentially, it determined that the relevant parties and witnesses reside in Nevada and most of Zuffa’s employees would need to travel to San Jose if the case stayed in Northern California.  The court did not buy the plaintiffs’ convenience of venue arguments stating it did not convince the court that “Nevada is any less convenient” for the plaintiffs despite arguing that Le and a couple other fighters resided in San Jose and that the San Jose area has a local interest in the lawsuit.

The court also shot down plaintiffs’ argument that San Jose was familiar with antitrust cases and is more efficient in getting them to trial than Las Vegas.  The court acknowledged this fact but stated, “ [e]ven assuming Plaintiffs are correct that the legal process in Nevada generally takes longer than it does in this [San Jose] district, that is simply not enough to overcome those other factors showing why this specific litigation is appropriately venued there.”

The Order is below and can also be pulled of Pacer for free.  Of course, if you pull it from here, please give us an h/t since we did the work for you.

Order – Motion to Transfer Venue

Payout Perspective:

The case would appear to swing in favor of Zuffa now that it is being moved to federal court in Las Vegas.  The pending Motion to Stay Discovery and Motion to Dismiss will be heard in the new venue in Las Vegas.  For the Motion to Stay Discovery, the parties have agreed to allow the plaintiffs to file opposition to the motion 30 days after the disposition of the Motion to Transfer.  So, the pleadings will be filed by plaintiffs by the end of June with a Reply by Zuffa following 14 days after the opposition is filed.

While it may not be the end for Zuffa, the loss could be considered as significant.  Its clear there was a reason why the plaintiffs filed in San Jose.  They were aware of the potential risks of filing with just a small amount of its plaintiffs having ties to the district.  But, the key was how much weight the court would give the forum selection clauses in the contracts.  Its clear from the order that the court took a pragmatic approach to the issue (i.e., what do the underlying contracts state) rather than a theoretical one.

We shall see what transpires with the transfer to Nevada.

UFC responds to McMann about gender equality

May 28, 2015

The UFC has issued a statement in light of the comments made by Sara McMann stating that the pending UFC-Reebok sponsorship deal is disproportionately unfair to women fighters.

Via MMA Fighting:

“The new UFC Athlete Outfitting Policy (AOP) equally recognizes each athlete’s tenure in UFC, as well as any bout appearances in the WEC and Strikeforce for the period those organizations were under the Zuffa, LLC ownership. Women fighters with limited bouts under the tenure model are treated the same as other experienced men or women new to UFC from other organizations not included in the tenure model. This new policy was designed to provide an equal opportunity for both men and women in each tenure tier. In addition, the champions and challengers, regardless of tenure, will be equally compensated under the AOP for their bouts, something few other sports can claim.”

Payout Perspective:

The interesting part about this Reebok deal is that if the UFC kept the policy based on the media rankings and the pay were the same across the board for men and women divisions, Zuffa would not be facing a potential gender discrimination lawsuit.  Even though a company policy may not be discriminatory on its face, if the application of the policy results in a disparate impact upon a protected class (i.e., women), then the policy may be a civil rights violation.  While the UFC’s statement does not harm its position, it is not persuasive either.  Civil rights lawsuits are expensive, take time and are hard to prove.  Still, the threat of litigation has to have Zuffa concerned.

McMann believes gender inequity in Reebok deal

May 27, 2015

MMA Fighting reports UFC women’s bantamweight Sara McMann is speaking out about the UFC’s new uniform deal and is considering legal action because she believes that the policy may be unfair to female fighters.

McMann was interviewed by Ariel Helwani on The MMA Hour and believes that the pay structure based on the number of fights a fighter has with the company is unfair to women. Women were added to the UFC two years ago and according to McMann 86% of the women in the UFC will fall in the first tier of compensation. Thus, they will receive only $2,500 per fight.

While Ronda Rousey is one of the top stars and highest paid fighters in the UFC, she is the exception to most women fighters in the company. Rousey and Joanna Jedrzejczyk will make $40,000 per fight from the Reebok deal. All champions make $40,000 per fight.

McMann indicated that she is speaking to a lawyer with experience in “Title IX cases.”

Payout Perspective:

Title IX relates to gender equity in education but is known mainly for equality in college athletics. Thus, McMann would probably want to look into whether the UFC is committing a civil rights violation because she is claiming that its new Reebok policy discriminates against women. McMann is choosing her words when talking about this subject as she did not use the word discrimination. But, when she talks about “gender equity” or “inequity” she is referring to the “d” word.

Civil rights claims are difficult to prove and certainly the UFC can argue the fact that just 2 years ago women began fighting in the UFC as a reason women are being paid less with the new sponsor deal.   It could also bring up Rousey and Jedrzejczyk as examples of women that are being paid in the upper tier as they are champions in the UFC. Of course, Jedrzejczyk’s first title defense is on UFC Fight Pass next month instead of a UFC PPV. A point that could fall in favor of McMann’s argument that women are treated differently than male fighters.

Of course, there’s the issue of UFC fighters being independent contractors as opposed to employees of Zuffa.

In the article, McMann did not say she would file a lawsuit, but take her concerns to the UFC which could mean that she could meet with the company and that they may take her complaint into consideration. Whether or not it would address the pay for female fighters will be something we will look for in the future.

W. Silva appeals commission ruling to Nevada Supreme Court

May 21, 2015

MMA Fighting reports that Wanderlei Silva will appeal the Nevada district court ruling which reversed the Nevada State Athletic Commission’s lifetime ban and fine of Silva.

Silva’s attorney, Ross Goodman, was pleased with the court’s ruling that Silva’s punishment was overturned but no happy with its ruling that it had jurisdiction over Silva.  With the court ruling, Monday, Silva would have to go back before the commission to determine his punishment for fleeing a drug test last year.

Silva argues that the commission had no right to drug test him since he was not licensed at the time.  The commission counters that it has oversight over combat sports within the state and thus had the right to test Silva.

Payout Perspective:

The appeal to the Supreme Court for the state of Nevada is a calculated risk but worth it.  The district court ruled in Silva’s favor but he still must go before the commission to be punished.  If Silva wins on appeal with a finding that the commission never had jurisdiction, his name is cleared.  It would also spur an amendment to the laws in Nevada.  Silva has a good chance with his appeal to the Supreme Court as the commission’s argument sought a very broad interpretation of the laws of the state.  Reading the laws plainly, one could see Silva winning the appeal.  We will see what happens.

W Silva wins reversal and remand of NSAC ban, fine

May 18, 2015 reports that a Nevada state district court judge has reversed and remanded the Nevada State Athletic Commission’s lifetime ban and $70,000 fine issued against Wanderlei Silva last year.  Judge Kerry L. Earley determined that while the NSAC had jurisdiction over Silva, the punishment was “arbitrary, capricious and not supported by substantial evidence.”

Judge Earley’s decision orders a new hearing by the commission to find a proper punishment for Silva’s violation of evading a random drug test in lead-up to his fight against Chael Sonnen at UFC 175.

The court indicated that a decision would be handed out by May 11th but the decision came a week later.

According to the ruling (as reported by ESPN, we will attempt obtain a copy), the court agreed with the NSAC’s argument that it had jurisdiction over Silva but not with the method the commission determined the penalty. If you watched the commission hearing, you may recall that there was an ad hoc moment where the commission determined a penalty based on what they knew of Silva’s pay.

Silva’s attorney, Ross Goodman, applauded the reversal of the suspension and the re-hearing but may consider an appeal of the ruling with respect to jurisdiction.

As a quick procedural background as to how the decision made its way to state superior court, as in many jurisdictions, the process for appeal of an administrative decision is to the state court.

Payout Perspective:

While I believed that the court may have found jurisdiction, Goodman’s potential appeal may not be as far-fetched as you might think.  The ruling means that we should see the commission re-evaluate Silva’s penalty.  It’s unlikely it will be able to impose the recommended guidelines it passed last Friday although one might surmise the commission will have this in the back of their minds.  Ironically, the NSAC discussed not wanting its decision to be overturned at the hearing (and cited in Silva’s petition for judicial review) for being “outside of the norm” of what the commission has done in the past.  It looks like the court has found it did overreach with its penalty.

FTC reopens investigation on Zuffa business practices

May 14, 2015

MMA Junkie reports that the Federal Trade Commission has reopened its investigation against Zuffa and has contacted people within the MMA industry about Zuffa’s business practices.

The government investigation occurred after Zuffa acquired Strikeforce.  The agency evaluated Zuffa’s financial documents and talked to UFC execs but the investigation yielded nothing to command a further inquiry at the time.  The FTC closed its investigation of Zuffa in early 2012.  MMA Payout’s FOIA request for documents related to that investigative led to nothing of substance except for a couple form letters which indicated that it “reserved the right to reopen the investigation if it deemed it necessary.”

It appears that it was necessary.

With the filing of the antitrust lawsuit by former UFC fighters, it appears that the FTC will take another look at Zuffa business practices.

The news comes out a day after Zuffa filed a motion to stay discovery pending its Motion to Dismiss plaintiffs’ complaint.

Payout Perspective:

The reopening of the investigation may help plaintiffs in its position that its complaint is valid.  It also will help with opposing Zuffa’s motion to stay discovery.  The FTC investigation may help plaintiffs with the argument that Zuffa’s financial documents are relevant to the litigation as you might expect an anticipated discovery fight over that information.  While the investigation by the FTC and the antitrust lawsuit are independent of one another it is clear that you might infer a tie-in between the two.  We will see how both lawsuit and government investigation proceed.

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